TMFPencils (99.82)

Money and Currency in a Free Society

8

We live in times when government and central banks monopolize money and make it next to impossible for viable competing currencies to arise, which can make it difficult to see the possibility of other alternatives.

Picture a new village, untouched by current monetary laws. People begin exchanging goods through the process of bartering. This makes it difficult to know what you can buy, because the milkman will only need so many of the pouches that you manufacture. Because bartering can be inefficient, unpredictable, and unreliable, the people decide to represent their goods with something of value. They find copper, silver, and gold nearby, all unique, relatively limited (therefore they hold more value than, say, granite), and quite durable. Thus, they can represent their goods with these valuable metals (and to make it more convenient, paper guarantees to those metals).

Money does not get its value through “force” as some believe. When the people in the village were looking for a more effective way to exchange goods, they were not trying to represent force. They were aiming to represent value through metals that were limited enough to have value, had durability, and could not easily be counterfeit (or inflated). Currency is never originally brought about by force or through government.

Historically government has gotten involved in currency for one reason: greed. Kings would debase the metals that the market freely used and valued. Kings would inflate and devalue the currency that was once stable when the market was in control. Government could not debase metals, clip coins, and print unsound paper money and expect people to voluntarily accept it, thus force was necessary to make it happen. Legal tender laws forced devalued government money on the people and markets.

It is difficult for government to grow when people demand that the money be backed by hard goods (such as metals). It is difficult for government to expand its presence when the money supply is stable and in the hands of the people. History clearly shows us that when government wants to expand its state or military presence beyond its usual bounds, it cannot do so without control over the nation’s money supply. Without the control of money, government would have to take every cent it needed directly from the people and businesses, an approach that would become very unpopular in a very short amount of time.

This is why governments have always tried to take control and monopolize money. If people are forced to use government money and cannot create a competing currency, they must use the money the government gives them. Government can then indirectly “tax” the people through inflation and devaluation of the currency. This allows government to grow its boundaries and influence without directly feeling the repercussions of a people who see their property forcefully go out the door to the government in the form of taxes. Monetary inflation is a very indirect and gradual process for government to take money from the people. And it can only work if people are forced to accept the debased and often worthless money. As the money supply grows without solid commodity backing, prices begin to rise, impacting poorer citizens the most.

This brings us to the U.S. Some have argued that the Constitution allows the government to pass legal tender laws and control many aspects of monetary policy. However, on close inspection, this power has been greatly abused and misinterpreted. The Constitution states:

Article I, Section 8: The Congress shall have Power…To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.

Article I, Section 10: No State shall…coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debt.

Congress has the power to coin money, regulate its value, but nowhere does it have the authority to force people to accept that money. Congress can create and regulate its money, but it cannot mandate that people use it through legal tender laws. The states are prohibited from coining money and are required to make only “gold and silver Coin a Tender in Payment of Debt.”

Neither the powers delegated to Congress or the states give them the authority to shove a currency onto the people. “Legal tender” means tender in the payment of debt. The states are given the duty to be sure that only gold and silver can be legal tender. For legal and juristic purposes, only gold and silver are legally acceptable in the payments of debt. But this does not give the state the power to dictate the forms of other monetary commodities or economic exchanges that the people and market might come up with. In other words, the state controls the legal use of money in the payment of debt, but neither the state or Congress has authority over the economic exchanges of money in the marketplace.

The Founders did not give the federal government the ability to monopolize currency and force it on the people. There is no power in the Constitution given to the government to restrict currency production and choice of the people and marketplace. In fact, many competing and private currencies functioned efficiently for a good part of the 1800s. Today, however, we accept legal tender laws as a legitimate role of Congress, when in reality they do nothing but unconstitutionally force a worthless currency on the people.

Consider the basic principles of modern legal tender laws. No government force or mandates would be necessary to encourage people to use a widespread, valuable, and sustainable currency. Legal tender laws and government coercion over money are always used to force a currency that would otherwise be worthless onto the people and marketplace. Imagine if the legal tender laws enacted in the 1960s, forcing people to accept Federal Reserve Notes, were repealed today. Who in their right minds would continue using a currency whose value consistently decreases, is in the control of seven central bankers, and in reality is worth nothing more than the paper on which it is printed?

People will often reply that repealing legal tender laws would lead to the creation of hundreds of private currencies and economic chaos. But remember something. Especially in today’s digital, national, and even global economy, a currency would have to be simple, recognizable, valuable, and widespread to have a chance of surviving in the market. People will naturally encourage and use the currency that holds the most value and brings the greatest amount of ease to transactions. If that is the currency produced by Congress, so be it.

Monetary freedom simply gives people the option of throwing off the restrictive chains of a centrally manipulated, inflated, and drastically devalued currency, the symptoms of a government out of control. Competition in money would force government to stay in line, live within its means (both domestically and overseas), and maintain high levels of sensibility and responsibility. History has visibly painted the picture that without control over money, government’s long-term abilities are only as able as those that the people directly delegate to it. Freedom of money plays a major role in ensuring freedom and representation in government.

“With the exception only of the period of the gold standard, practically all governments of history have used their exclusive power to issue money to defraud and plunder the people.” — F.A. Hayek

“Paper money has had the effect in your state that it will ever have, to ruin commerce, oppress the honest, and open the door to every species of fraud and injustice.” — George Washington

“All the perplexities, confusion and distresses in America arise not from defects in the constitution or confederation, nor from want of honor or virtue, as much from downright ignorance of the nature of coin, credit, and circulation.” — John Adams

“Whoever controls the volume of money in any country is absolute master of all industry and commerce.” — James A. Garfield

"Neither the powers delegated to Congress or the states give them the authority to shove a currency onto the people. “Legal tender” means tender in the payment of debt. The states are given the duty to be sure that only gold and silver can be legal tender. For legal and juristic purposes, only gold and silver are legally acceptable in the payments of debt."

I think your fallacy in interpreting the constitution is in the paragraph above.

The constitution does delegate the power to coin money to Congress. Nothing about gold and silver in that clause. Nothing.

Then on top of that it gives them the power to regulate it's value, which makes it even more of a slam dunk.

Then it prohibits the states from making anything other than gold or silver legal tender, which basically just prevents them from issuing their own money. It doesn't say anything about them being required to implement any special laws requiring only gold or silver and excluding the national currency issued by Congress. It just prohibits them from issuing their own currency. That's it.

Then we add the Article 6 supremacy clause and the power for Congress to regulate interstate commerce, and you get a pretty good picture of what the constitution does here.

I'm not saying its necessarily a good idea to debase the currency, but I am saying that the Constitution intended for Congress to have exactly that power. Scalia would agree with me.

As for the current crazy dollar or the much more sober gold-backed dollar, I wouldn't be too quick to say the gold-backed dollar was better. Look at the balance of power in the world. This was achieved with funny money. The results are real. It's no joke. Our massive military power has gotten the job done. We are on top, thanks to the system we have in no small part.

Your post seems to get at the idea that power rules over money, and you don't seem to like it. But there isn't really any other way. Power rules. That's just a fact of life. "Stop pointing that gun at my head or I won't give you any money" doesn't work.

So you may be right that the system isn't fair or isn't right or isn't the way you'd like it or whatever. But that's not really the point of the system.

In the world of power, winning isn't everything, it's the only thing. Fairness is just a footnote.

Are you saying that because the U.S. military is powerful, that makes you better off? Every resource the government funnels into the Military Industrial Complex is a resource that could have been put to use in the private sector.

Just win baby? Win what? What are we winning? Have you ever served in the military? We used to beat up people that talked like that.

The only things that governments excel at are killing people and landscaping.

whereaminow - I am saying exactly because the US military is powerful, that makes me better off. If it wasn't powerful, we'd be under the thumb of whoever's military was powerful. That's just how the world works. Wrong or right, we're the one with might. You can think the US isn't fair to other less-powerful countries, and you are probably right. But there's no reason to think they'd be fair to us if the military situation was reversed. People aren't that different. There aren't really good guys and bad guys, but there will always be "us and them, and after all, we're only ordinary men" as Pink Floyd put it. "I'd rather be a hammer than a nail" as Simon and Garfunkel put it. We're not the bad guys, we're just the strong guys - largely because of the strength of the military. Don't take it for granted.

JS, they did a real bang up job defending us on 911, and we haven't seen any terrorism because the PNAC hasn't needed an excuse to go to war lately; we got our hands full. our military is expensive, and has technology, but the US gov pays $10,000 for toilet seats and hammers, so I can only imagine the countries we sub out our work to also can get more bang for the buck, so to speak. It will be interesting to see the part some of our more cutting edge technologies will play, such as HAARP, or larger scale versions of microwave technologies already in place